Designation Of Seat Of Arbitration Akin To An Exclusive Jurisdiction Clause: Delhi High Court Allows Section 11 Application

The Delhi High Court single bench of Justice Prateek Jalan held that designation of a seat of arbitration is akin to an exclusive jurisdiction clause. It emphasized that in an agreement featuring distinct forum selection and seat clauses, the clause designating the seat takes precedence and assumes pre-eminence.

Brief Facts:

The matter pertained to disputes arising from a "Management Services Agreement" dated 28.08.2019 between the parties. According to the Agreement, the Petitioner was entrusted with operating the Respondent's hotel in Howrah, West Bengal. Notably, the Agreement included an arbitration clause. In response to disputes that emerged between the parties, the Petitioner initiated arbitration proceedings through a legal notice. The parties having been unable to achieve consensus on the appointment of the arbitrator, the Petitioner approached the Delhi High Court (“High Court”) and filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). The Respondent's response disputed the Petitioner's allegations and asserted that the Courts in Kolkata hold exclusive jurisdiction over matters arising from the Agreement. The relevant arbitration clause is reproduced below:

“10.1 Arbitration: Any dispute arising out of this Agreement and the obligation thereunder (“Dispute) shall be finally settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof for the time being in force. The Parties agree that the Dispute shall be adjudicated by a mutually appointed single arbitrator. The arbitration proceedings shall be conducted in English language and seat of arbitration shall be New Delhi.

10.2 Jurisdiction: subject to foregoing courts at Kolkata shall have exclusive jurisdiction in all matters arising out of this Agreement.”

Observations by the High Court:

The High Court noted that the agreement designated New Delhi as the seat, and the jurisdiction clause conferred exclusive authority to the courts in Kolkata, beginning with the words "subject to forgoing." Consequently, it held that there was no substantial conflict between the seat clause and the exclusive jurisdiction clause.

The High Court held that the exclusive jurisdiction of the seat court in matters arising from the arbitration agreement applies both to the appointment of an arbitrator and to proceedings under Section 9 or Section 34 of the Arbitration Act. It held that exempting Section 11 proceedings from the exclusive jurisdiction of the seat Court would contradict the principles of party autonomy and the concept of a neutral venue as the seat of arbitration. Recognizing that parties can repose their faith in a seat without subject matter jurisdiction, it held that it is imperative that the appointment of the tribunal must also be made by such a neutral Court. Any other interpretation risks diminishing the significance of the neutral venue, allowing parties to approach any Court falling under the definition of "Court" for the fundamental task of appointing the arbitrator, as defined in Section 2(1)(e) of the Arbitration Act.

Consequently, the petition was allowed, and the disputes between the parties were referred to the arbitration of Justice Jayant Nath, former Judge of the Delhi High Court.

Case Title: My Preferred Transformation And Hospitality Pvt. Ltd. Vs Panchdeep Constuction Limited

Citation: 2024 LiveLaw (Del) 255

Case Number: ARB.P. 847/2023.

Advocate for the Petitioner: Mr. Sagar Kumar Pradhan, Mr. Diptiman Acharyya & Ms. Shreya Srivastava, Advocates.

Advocate for the Respondent: Mr. Anirban Kar, Mr. Neeraj Soodh, Mr. Munshi Ashiq Elahi & Md. Sahidullah Mridha, Advocates.

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